Private equity firm Blackstone Group is in talks to buy a stake in the frequent-flyer loyalty programme of the troubled Jet Airways. The deal could value Jet Privilege at about Rs 3,000 ( about $429 million) to Rs 4,000 crore.
The stake sale would provide some relief for the Mumbai-based company, which faces loan repayment of Rs 3,120 crore through the year till March 2019.
Moody's Investors Service lowered Jet's debt rating in May a notch to BB+ with a negative outlook, which means a moderate risk of defaulting on honouring obligations in midst of the carrier's inability of passing rising fuel costs to the customers.
Lenders are reluctant to extend loans and want the airliner to raise money from stake sale before they can offer fresh credit.
Banks are waiting for Jet's financial accounts to be audited after it failed to announce its earnings last week.
Total debt of the company stood at Rs 9,430 crore in end-March, which is 55.4 times of its earning in the latest financial year compared to 4.9 times the previous year.
According to Kapil Kaul, South Asia CEO for CAPA Centre for Aviation, Jet immediately needs $500 million in cash and must refinance a guarantor-backed $400 million of debt to keep its business afloat.
Etihad owns 50.1% of the loyalty programme while the rest is owned by Jet. However, the deal would only go through if Jet is able to secure enough funding to keep operations going. And, there is no certainty that the deliberations will end in agreement. There is also the likelihood that other players may come forward for a stake in Jet Privilege.
Jet's cash reserves have dwindled due to rising crude oil prices and intense competition in the Indian market. The airline has said that it is evaluating all options to meet liquidity requirements and looking at measures to enhance revenue generation and increase cost-cutting.
